Although Mercedes-Benz may have removed the diesel engine from its latest Smart car, the company is moving full-steam ahead with its new Bluetec diesel models, now that cleaner-burning, lower-sulphur-content diesel fuel is making its way onto the Canadian market.

So what is Bluetec? In a nutshell, it's Mercedes's common-rail diesel power plant with a more thorough combustion process and upgraded exhaust system. Among other things, the Bluetec setup has a particulate filter to trap any leftover "soot", as well as an oxidation catalyst that will re-treat spent exhaust gases and extract hydrocarbons. There is also a self-cleaning feature that will routinely scour the engine to root out any stubborn residue–usually during highway cruising.

Mercedes introduced Bluetec to its North American E-Class line in 2007, but it's been available in Europe for a couple of years now. Either way, the result is the cleanest-burning diesel engine in today's passenger-car market.

And that's without sacrificing performance or fuel economy; the 2008 E320 Bluetec is rated at 210 horsepower and 400 foot-pounds of torque. While the first number may not be particularly impressive, squeezing 400 foot-pounds of torque from this size of diesel engine is remarkable. Especially when you consider that it reaches its peak output at just 1,600 rpm and redlines at a relatively modest 4,500 rpm. Mercedes claims a 0-100-kilometres-per-hour time of just under seven seconds for the E320 Bluetec, making it one of the faster four-door sedans out there. And it delivers a miserly fuel economy of 6.1 litres per 100 kilometres on the highway.

At the heart of all this is a 3.0-litre V6 turbo-diesel that features four valves per cylinder and a pair of overhead camshafts. It's mated to a seven-speed automatic transmission with a manual shift mode and two settings: "comfort" and "sport". The car runs on 16-inch wheels and tires. Last year, this engine took home the Automotive Journalists Association of Canada's best new technology award, and garnered world green car honours at the World Car of the Year Awards.

In virtually every respect, the Bluetec engine is a completely civilized and usable diesel power train. Cold starts require a very brief waiting period–two or three seconds, tops–for the little logo to light up on the instrument nacelle, and then away you go. And this is only during particularly chilly winter weather; if the car has been driven earlier in the day, for example, there is no wait time. In operation, the diesel engine is willing, quiet, and unobtrusive.

During my time with this car, the fact that I was driving a diesel was almost irrelevant, and I didn't even catch a whiff of diesel exhaust or unburned fuel. Mercedes also seems to have addressed the noise, vibration, and harshness issue; this iteration of the E320 seemed quieter and less harsh-sounding than the last one I drove, and I have driven cars with less refined conventional gas engines.

And being a Mercedes, the E320 Bluetec comes with a full roster of comfort and convenience features. It's pretty much redundant to talk about things like heated front seats; power windows; remote keyless entry; walnut wood trim; front, side, and side-curtain airbags; and so on, because just about every Mercedes has this stuff. But the E-Class also has goodies like Bluetooth capability, power tilt/telescoping steering, a heated steering wheel, Sirius satellite radio, and Mercedes's Pre-Safe accident-sensing system, which will tighten up the seat belts and close the windows and sun roof before something bad happens.

My tester also came with a full-leather interior ($2,500), and the Sedan Premium Package ($3,200), which includes a navigation system, rear-window sunshade, backup warning sensors, and a power trunk-lid.

Speaking of which, there's 540 litres of cargo capacity behind the rear seat, which is generous for a car of this size. By way of comparison, BMW's 5 Series offers 500 litres, while the Infiniti M35 and M45 have 422 litres of room back there.

The E320 Bluetec also makes a fine highway cruiser. In fact, you could argue that this is where the diesel engine really shines. It's more than acceptable around town, but its substantial torque output and long legs make it perfect for long-distance highway duty.

However, a few little quibbles: first off, it seems to take this vehicle an inordinately long time to clear the windshield and warm up the interior in the morning. One of the drawbacks of diesel engines is that they tend to be slower to warm than their gasoline-fuelled counterparts, and if it has snowed the night before or is particularly frosty out there, give yourself plenty of time to get comfy. Secondly, the E320 has extremely sensitive steering–maybe too sensitive–and during parking and cornering, you almost have to bring the wheel back to its centre position manually; the power-steering mechanism seems reluctant to detente.

Still, it's pretty hard to argue with combined fuel rating of 7.7 litres per 100 kilometres for a full-size luxury sedan.